Will Reform Open the Flood Gates for Health-Care Fraud?

Often preying on the program’s elderly and poor beneficiaries, Medicare fraudsters cost the government $47 billion last year alone, using billing scams that some officials have called more profitable than drug-trafficking. Earlier this month, 26 individuals in three cities were arrested a series of raids for bilking Medicare of $61 million, including a Florida doctor accused of running a $40 million scheme that falsely listed patients as blind diabetics so he could bill them for home nursing care. Similarly outrageous scams include false claims for power wheelchairs claimed to be destroyed during Hurricane Katrina and drug prescriptions from doctors who have died.

The reform bills moving through Congress commit more than $100 million to prevent fraud and strengthen enforcement practices. And by the time the Senate was finished working on its bill, it had adopted even tougher anti-fraud measures than the House had--increasing penalties for health-care fraud, expanding the definition of actionable offenses, and devoting greater resources to fraud detection. Such provisions would beef up the anti-fraud funds that Obama has already pledged to HHS in the 2010 budget, which the agency says could save the government at least $2.7 billion.

But is that enough? According to one recent George Washington University report, the bill’s mandated conversion to electronic claims transactions will both “increase the volume of claims and allow large enterprises to use technology to engage in fraud while avoiding computer fraud detection systems.” (White-collar fraudsters are using increasingly sophisticated tools to run their scams, and the Mafia and other major criminal enterprises are also getting in on the racket.) The massive expansion of Medicaid, whose enrollment will increase by 15 million if the bill passes, could also allow fraud to proliferate in states with poor records of curbing abuses. Last week, for instance, an audit revealed that New York State’s Medicaid program lost $92 million over five years as a result of improper payments and poor recordkeeping.

To its credit, the Obama administration has already taken significant steps toward combating health-care fraud, even ahead of the reform bill. In May, the Departments of Justice and Health and Human Services launched a joint “Medicare Fraud Strike Force” that’s been behind the recent upswing in indictments. And part of the reason that Medicare fraud losses have tripled over the last year—and attracted significant public attention as a result—is that the White House has introduced stringent new reporting requirements. Such vigilance hasn't had a major impact on shaping the debate over whether Congress enact health-care reform. But it could make a huge difference in how successful public officials will be in implementing the bill's sweeping changes.